<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- -----------------
Commission file number 0-22056
RURAL/METRO CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE
(State or other jurisdiction
of incorporation or organization)
86-0746929
(I.R.S. Employer
Identification No.)
8401 EAST INDIAN SCHOOL ROAD
SCOTTSDALE, ARIZONA
85251
(Address of principal executive offices)
(Zip Code)
(602) 994-3886
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At May 9, 1997 there were 11,875,158 shares of Common Stock outstanding,
exclusive of treasury shares held by the Registrant.
<PAGE> 2
RURAL/METRO CORPORATION
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Statements
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
Item 2(c). Changes in Securities 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
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<PAGE> 3
RURAL/METRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND JUNE 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 730 $ 1,388
Accounts receivable, net 96,836 68,642
Inventories 6,638 5,170
Prepaid expenses and other 6,418 5,710
--------- ---------
Total current assets 110,622 80,910
PROPERTY AND EQUIPMENT, net 58,411 48,401
INTANGIBLE ASSETS, net 117,218 96,373
OTHER ASSETS 7,096 4,430
--------- ---------
$ 293,347 $ 230,114
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,843 $ 4,092
Accrued liabilities 14,046 14,806
Current portion of long-term debt 7,027 6,610
--------- ---------
Total current liabilities 24,916 25,508
LONG-TERM DEBT, net of current portion 101,475 60,731
NON-REFUNDABLE SUBSCRIPTION INCOME 12,955 12,582
DEFERRED INCOME TAXES 10,042 9,060
OTHER LIABILITIES 2,552 2,267
--------- ---------
Total liabilities 151,940 110,148
--------- ---------
STOCKHOLDERS' EQUITY
Common stock 120 113
Additional paid-in capital 100,517 92,359
Retained earnings 42,956 30,181
Deferred compensation (947) (1,448)
Treasury stock (1,239) (1,239)
--------- ---------
Total stockholders' equity 141,407 119,966
--------- ---------
$ 293,347 $ 230,114
========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated balance sheets.
-3-
<PAGE> 4
RURAL/METRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended March 31, Nine Months Ended March 31,
---------------------------- ---------------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
REVENUE
Ambulance services $69,161 $51,789 $190,654 $143,246
Fire protection services 10,551 9,813 31,205 28,503
Other 5,209 3,382 14,586 9,837
------- ------- -------- --------
Total revenue 84,921 64,984 236,445 181,586
------- ------- -------- --------
OPERATING EXPENSES
Payroll and employee benefits 44,706 34,596 127,207 98,198
Provision for doubtful accounts 11,878 8,138 32,037 22,445
Depreciation 2,995 2,571 8,646 7,063
Amortization of intangibles 1,149 888 3,349 2,574
Other operating expenses 14,693 12,016 41,640 34,378
------- ------- -------- --------
Total expenses 75,421 58,209 212,879 164,658
------- ------- -------- --------
OPERATING INCOME 9,500 6,775 23,566 16,928
INTEREST EXPENSE, net 1,576 1,706 3,658 4,136
------- ------- -------- --------
INCOME BEFORE INCOME TAXES 7,924 5,069 19,908 12,792
PROVISION FOR INCOME TAXES 3,249 2,080 8,163 5,305
------- ------- -------- --------
NET INCOME $ 4,675 $ 2,989 $ 11,745 $ 7,487
======= ======= ======== ========
EARNINGS PER COMMON STOCK AND
COMMON STOCK EQUIVALENT $ 0.38 $ 0.31 $ 0.97 $ 0.79
======= ======= ======== ========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK AND COMMON
STOCK EQUIVALENTS OUTSTANDING 12,369 9,735 12,154 9,522
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE> 5
RURAL/METRO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 11,745 $ 7,487
Adjustments to reconcile net income to cash
used in operations --
Depreciation and amortization 11,995 9,637
Amortization of deferred compensation 502 459
Amortization of gain on sale of real estate (78) (78)
Provision for doubtful accounts 32,037 22,445
Change in assets and liabilities, net of
effect of businesses acquired --
Increase in accounts receivable (56,523) (40,368)
Increase in inventories (1,328) (279)
Increase in prepaid expenses and other (1,036) (1,673)
Decrease in accounts payable (479) (2,865)
Increase (decrease) in accrued liabilities and other (4,785) 307
Increase in non-refundable subscription income 373 362
Increase in deferred income taxes 195 1,837
-------- --------
Net cash used in operating activities (7,382) (2,729)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Borrowings on revolving credit facilities, net 45,200 40,600
Repayment of debt and capital lease obligations (17,221) (17,474)
Borrowings of debt -- 2,016
Issuance of common stock 8,076 2,070
-------- --------
Net cash provided by financing activities 36,055 27,212
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Cash paid for businesses acquired (12,616) (8,887)
Capital expenditures (14,049) (13,806)
Increase in other assets (2,666) (122)
-------- --------
Net cash used in investing activities (29,331) (22,815)
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (658) 1,668
CASH AND CASH EQUIVALENTS, Beginning of period 1,388 900
-------- --------
CASH AND CASH EQUIVALENTS, End of period $ 730 $ 2,568
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
-5-
<PAGE> 6
RURAL/METRO CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements.
(1) INTERIM RESULTS
In the opinion of management, the consolidated financial statements for
the three month and nine month periods ended March 31, 1997 and 1996
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of the consolidated financial position and
results of operations for that period.
The results of operations for the three month and nine month periods ended
March 31, 1997 and 1996 are not necessarily indicative of the results of
operations for a full fiscal year.
(2) ACQUISITIONS
During the nine months ended March 31, 1997 the Company purchased the
stock of an ambulance service provider operating in Kentucky and the
assets of ambulance service providers operating in Indiana, Ohio,
Kentucky, South Carolina and Georgia.
The acquisitions were accounted for as purchases in accordance with
Accounting Principles Board Opinion No. (APB) 16 and, accordingly, the
purchased assets and assumed liabilities were recorded at their estimated
fair values at each respective acquisition date.
The aggregate purchase price consisted of the following:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Cash $12,616
Notes payable to sellers 3,067
Assumption of liabilities 11,367
-------
$27,050
=======
</TABLE>
During the nine months ended March 31, 1997, subsidiaries of the Company
merged with and into an ambulance service provider operating in
Pennsylvania and an ambulance service provider operating in Arkansas. The
Company issued an aggregate of 361,970 shares of its common stock in
exchange for all of the issued and outstanding stock of the acquired
companies. The transactions were accounted for as poolings-of-interest in
accordance with APB 16.
The unaudited pro forma combined condensed statements of income for the
fiscal year ended June 30, 1996 and the nine months ended March 31, 1997
give effect to the acquisitions as if each had been consummated as of the
beginning of each respective period.
The pro forma combined condensed financial statements do not purport to
represent what the Company's actual results of operations or financial
position would have been had such transactions in fact occurred on such
dates. The pro forma combined condensed statements of income also do not
purport to project the results of operations of the Company for the
current year or for any future period.
-6-
<PAGE> 7
RURAL/METRO CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
FOR THE YEAR ENDED JUNE 30, 1996
AND FOR THE NINE MONTHS ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
JUNE 30, 1996 MARCH 31, 1997
------------- --------------
PROFORMA PROFORMA
HISTORICAL COMBINED HISTORICAL COMBINED
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenue $250,263 $310,499 $236,445 $254,111
Net income $ 11,512 $ 14,910 $ 11,745 $ 12,695
Earnings per share $ 1.14 $ 1.37 $ 0.97 $ 1.03
</TABLE>
Pro forma adjustments include adjustments to: (i) reflect amortization of
the cost in excess of the fair value of net assets acquired; (ii) adjust
payroll and related expenses for the effect of certain former owners of
the acquired businesses not being employed by the Company and to reflect
the difference between the actual compensation paid to officers of the
businesses acquired and the lower level of aggregate compensation such
individuals would have received under the terms of employment agreements
executed between the Company and such individuals; (iii) adjust other
operating expenses to reflect the reduction of expenses related to certain
real estate and buildings not acquired and sellers' costs incurred in
connection with the sale of their respective businesses; (iv) adjust
interest expense to reflect interest expense related to debt issued in
connection with the acquisitions; and, (v) adjust income taxes to reflect
the tax effect of the adjustments and the tax effect of treating all of
the acquisitions as if they had C corporation status.
(3) RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share" which supersedes APB 15, the existing authoritative guidance. SFAS
No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997 and requires restatement of all
prior period earnings per share (EPS) data presented. The new statement
modifies the calculation of primary and fully diluted EPS and replaces
them with basic and diluted EPS. Pro forma EPS assuming implementation of
SFAS No. 128 at the beginning of the period for the three and nine month
periods ending March 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, NINE MONTHS ENDED MARCH 31,
---------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic $0.40 $0.32 $1.03 $0.83
Diluted $0.38 $0.31 $0.97 $0.79
</TABLE>
-7-
<PAGE> 8
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company derives its revenue primarily from fees charged for ambulance and
fire protection services. The Company provides ambulance services in response to
emergency medical calls ("911" emergency ambulance services) and non-emergency
transport services (general transport services) to patients on both a
fee-for-service basis and non-refundable subscription fee basis. Per transport
revenue depends on various factors, including the mix of rates between existing
markets and new markets and the mix of activity between "911" emergency
ambulance services and general transport services as well as other competitive
factors. Fire protection services are provided either under contracts with
municipalities or fire districts or on a non-refundable subscription fee basis
to individual homeowners or commercial property owners.
Ambulance service fees are recorded net of Medicare, Medicaid and other
reimbursement limitations and are recognized when services are provided.
Payments received from third-party payors represent a substantial portion of the
Company's ambulance service fee receipts. Provision for doubtful accounts is
made for the expected difference between ambulance services fees charged and
amounts actually collected. The Company's provision for doubtful accounts
generally is higher with respect to collections to be derived directly from
patients than for collections to be derived from third-party payors and
generally is higher for "911" emergency ambulance services than for general
ambulance transport services.
Because of the nature of the Company's ambulance services, it is necessary to
respond to a number of calls, primarily "911" emergency ambulance service calls,
which may not result in transports. Results of operations are discussed below on
the basis of actual transports since transports are more directly related to
revenue. Expenses associated with calls that do not result in transports are
included in operating expenses. The percentage of calls not resulting in
transports varies substantially depending upon the mix of general transport and
"911" emergency ambulance service calls in the Company's markets and is
generally higher in markets in which the calls are primarily "911" emergency
ambulance service calls. Rates in the Company's markets take into account the
anticipated number of calls that may not result in transports. The Company does
not separately account for expenses associated with calls that do not result in
transports.
Revenue generated under fire protection services contracts is recognized over
the life of the contract. Subscription fees received in advance are deferred and
recognized over the term of the subscription agreement, which generally is one
year.
Other revenue consists primarily of fees associated with alternative
transportation services and is recognized when the services are provided.
Other operating expenses consist primarily of rent and related occupancy
expenses, maintenance and repairs, insurance, fuel and supplies, travel and
professional fees.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
REVENUE
Total revenue increased $19.9 million, or 30.6%, from $65.0 million for the
three months ended March 31, 1996 to $84.9 million for the three months ended
March 31, 1997. Approximately $12.8 million of this increase resulted from the
acquisition of ambulance service providers during the last quarter of fiscal
1996 and the first three quarters of fiscal 1997. Ambulance service revenue in
markets served by the Company in both of the three month periods ended March 31,
1996 and 1997 increased by 8.9%. Fire protection services revenue increased $0.8
million, or 8.2%, from $9.8 million for the three months ended March 31, 1996 to
-8-
<PAGE> 9
$10.6 million for the three months ended March 31, 1997. Other revenue increased
by $1.8 million, or 52.9%, in the three months ended March 31, 1997.
Total ambulance transports increased by 61,000, or 33.3%, from 183,000 for the
three months ended March 31, 1996 to 244,000 transports for the three months
ended March 31, 1997. The acquisition of fifteen ambulance service companies
during the last quarter of fiscal 1996 and the first three quarters of fiscal
1997 accounted for 46,000 of these additional transports.
Fire protection services revenue increased due to revenue generated from new
fire protection contracts awarded to the Company through competitive bidding and
due to rate increases for fire protection services.
OPERATING EXPENSES
Payroll and employee benefits increased $10.1 million, or 29.2%, from $34.6
million for the three months ended March 31, 1996 to $44.7 million for the three
months ended March 31, 1997. This increase was primarily due to the acquisition
of fifteen ambulance service providers during the last quarter of fiscal 1996
and the first three quarters of fiscal 1997.
Provision for doubtful accounts increased $3.8 million, or 46.9%, from $8.1
million for the three months ended March 31, 1996 to $11.9 million for the three
months ended March 31, 1997. Provision for doubtful accounts increased from
12.5% of total revenue for the three months ended March 31, 1996 to 14.0% of
total revenue for the three months ended March 31, 1997, reflecting the effect
of the acquisition of ambulance service providers during the last quarter of
fiscal 1996 and the first three quarters of fiscal 1997 operating in markets
with a greater mix of "911" emergency activity.
Depreciation increased $0.4 million, or 15.4%, from $2.6 million for the three
months ended March 31, 1996 to $3.0 million for the three months ended March 31,
1997, primarily as a result of depreciation expense on property and equipment
obtained through recent ambulance service acquisitions. Depreciation decreased
from 4.0% of total revenue for the three months ended March 31, 1996 to 3.5% of
total revenue for the three months ended March 31, 1997.
Amortization of intangibles increased by $0.2 million, or 22.2%, from $0.9
million for the three months ended March 31, 1996 to $1.1 million for the three
months ended March 31, 1997. This increase is primarily a result of intangible
assets recorded in recent acquisitions. Amortization of intangibles was 1.4% of
total revenue for the three month periods ended March 31, 1996 and 1997.
Other operating expenses increased approximately $2.7 million, or 22.5%, from
$12.0 million for the three months ended March 31, 1996 to $14.7 million for the
three months ended March 31, 1997 primarily due to increased expenses associated
with the operation of the fifteen ambulance service providers acquired during
the last quarter of fiscal 1996 and the first three quarters of fiscal 1997.
Other operating expenses decreased from 18.5% of total revenue for the three
months ended March 31, 1996 to 17.3% of total revenue for the three months ended
March 31, 1997 as a result of operational efficiencies realized through the
integration of these acquired companies.
Interest expense decreased $0.1 million from $1.7 million for the three months
ended March 31, 1996 to $1.6 million for the three months ended March 31, 1997.
This decrease was attributable to lower interest rates on the Company's $125
million revolving credit facility.
The Company's effective tax rate was 41.0% for the three month periods ended
March 31, 1996 and 1997.
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<PAGE> 10
NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996
REVENUE
Total revenue increased $54.8 million, or 30.2%, from $181.6 million for the
nine months ended March 31, 1996 to $236.4 million for the nine months ended
March 31, 1997. Approximately $34.3 million of this increase resulted from the
acquisition of ambulance service providers during the last quarter of fiscal
1996 and the first three quarters of fiscal 1997. Ambulance service revenue in
markets served by the Company in both of the nine month periods ended March 31,
1996 and 1997 increased by 9.2%. Fire protection services revenue increased by
$2.7 million, or 9.5%, from $28.5 million for the nine months ended March 31,
1996 to $31.2 million for the nine months ended March 31, 1997. Other revenue
increased by $4.8 million, or 49.0%, in the nine months ended March 31, 1997.
Total ambulance transports increased by 148,000, or 28.5%, from 520,000 for the
nine months ended March 31, 1996 to 668,000 for the nine months ended March 31,
1997. The acquisition of fifteen ambulance service companies during the last
quarter of fiscal 1996 and the first three quarters of fiscal 1997 accounted for
115,000 of these additional transports.
Fire protection services revenue increased due to revenue generated from new
fire protection contracts awarded to the Company through competitive bidding and
due to rate increases for fire protection services.
OPERATING EXPENSES
Payroll and employee benefits increased $29.0 million, or 29.5%, from $98.2
million for the nine months ended March 31, 1996 to $127.2 million for the nine
months ended March 31, 1997. This increase was primarily due to the acquisition
of fifteen ambulance service providers during the last quarter of fiscal 1996
and the first three quarters of fiscal 1997.
Provision for doubtful accounts increased $9.6 million, or 42.9%, from $22.4
million for the nine months ended March 31, 1996 to $32.0 million for the nine
months ended March 31, 1997. Provision for doubtful accounts increased from
12.3% of total revenue for the nine months ended March 31, 1996 to 13.5% of
total revenue for the nine months ended March 31, 1997, reflecting the effect of
the acquisition of ambulance service providers during the last quarter of fiscal
1996 and the first three quarters of fiscal 1997 operating in markets with a
greater mix of "911" emergency activity.
Depreciation increased $1.5 million, or 21.1%, from $7.1 million for the nine
months ended March 31, 1996 to $8.6 million for the nine months ended March 31,
1997, primarily as a result of depreciation expense on equipment obtained
through recent ambulance service acquisitions. Depreciation decreased from 3.9%
of total revenue for the nine months ended March 31, 1996 to 3.7% of total
revenue for the nine months ended March 31, 1997.
Amortization of intangibles increased by $0.7 million, or 26.9%, from $2.6
million for the nine months ended March 31, 1996 to $3.3 million for the nine
months ended March 31, 1997. This increase is primarily a result of intangible
assets recorded in recent acquisitions. Amortization of intangibles was 1.4% of
total revenue for the nine months ended March 31, 1996 and 1997.
Other operating expenses increased $7.2 million, or 20.9%, from $34.4 million
for the nine months ended March 31, 1996 to $41.6 million for the nine months
ended March 31, 1997, primarily due to increased expenses associated with the
operation of the fifteen ambulance service providers acquired during the last
quarter of fiscal 1996 and the first three quarters of fiscal 1997. Other
operating expenses decreased from 18.9% of total revenue for the nine months
ended March 31, 1996 to 17.6% of total revenue for the nine months ended March
31, 1997, as a result of operational efficiencies realized through the
integration of these acquired companies.
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<PAGE> 11
Interest expense decreased by $0.4 million from $4.1 million for the nine months
ended March 31, 1996 to $3.7 million for the nine months ended March 31, 1997.
This decrease was attributable to lower rates on the Company's $125 million
revolving credit facility and lower balances outstanding during the quarter as a
result of the Company's April 1996 stock offering.
The Company's effective tax rate decreased from 41.5% for the nine months ended
March 31, 1996 to 41.0% for the nine months ended March 31, 1997, primarily the
result of tax planning strategies implemented by the Company during fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its cash requirements principally through
cash flow from operating activities, term and revolving indebtedness, capital
equipment lease financing, the sale of stock through an initial public offering
in July 1993 and subsequent public stock offerings in May 1994 and April 1996,
and the on-going exercise of stock options.
During the nine months ended March 31, 1997, the Company used cash flow from
operations of $7.4 million. This compares to cash flow used in operations of
$2.7 million for the nine months ended March 31, 1996. This change resulted
primarily from increases in accounts receivable, inventories and prepaid
expenses, and a decrease in accrued liabilities.
Approximately $94.0 million was outstanding on the Company's revolving credit
facility at March 31, 1997. Availability on the facility was $28.0 million at
March 31, 1997.
During the nine months ended March 31, 1997, the Company purchased the stock of
an ambulance service provider operating in Kentucky and the assets of ambulance
service providers operating in Indiana, Ohio, Kentucky, South Carolina and
Georgia. The acquisitions were accounted for as purchases in accordance with
Accounting Principles Board Opinion No. 16 (APB 16). The aggregate purchase
price was $27.1 million, consisting of cash of $12.6 million, notes payable to
sellers of $3.1 million and liabilities assumed of $11.4 million. The Company
funded the cash portion of the acquisitions primarily from the Company's
revolving credit facility.
During the nine months ended March 31, 1997, subsidiaries of the Company merged
with and into an ambulance service provider operating in Pennsylvania and an
ambulance service provider operating in Arkansas. The Company issued an
aggregate of 361,970 shares of its common stock in exchange for all of the
issued and outstanding stock of the acquired companies. The transactions were
accounted for as poolings-of-interest in accordance with APB 16.
During the nine months ended March 31, 1997, the Company made an investment of
$2.5 million in National Health Enhancement Systems (NHES), a provider of
medical information, technology and software products to managed care providers.
The Company purchased 370,370 shares of NHES common stock, representing
approximately 7% of its aggregate outstanding common stock.
The Company has registered 3.2 million shares of common stock for issuance in
connection with acquisitions. At March 31, 1997, approximately 1.8 million of
the shares have been issued.
In February 1997, the Company signed definitive agreements to acquire four
entities doing business as Southwest Ambulance, one of Arizona's largest private
ambulance companies. Completion of the acquisition is subject to regulatory
approval by the United States Federal Trade Commission (FTC) and the Arizona
Department of Health Services (ADHS). In April 1997, the staff of the FTC
requested the Company to provide additional information and documentary material
relevant to the proposed acquisition. In addition, ADHS has scheduled a public
hearing relevant to the acquisition. No assurance can be given that the Company
will obtain the approvals required to complete the acquisition.
-11-
<PAGE> 12
In April 1997, the Company signed definitive agreements to acquire the stock of
seven Ontario-based ambulance providers. Completion of these acquisitions is
subject to regulatory approval by the Ontario Ministry of Health, and no
assurance can be given that the Company will obtain the approvals required to
complete any or all of these acquisitions.
The Company expects that cash flow from operations and additional borrowing
capacity will be sufficient to meet its operating and capital needs for existing
operations as well as to fund certain service area expansion and acquisitions
for the twelve months subsequent to March 31, 1997. The Company is engaged in an
active acquisition program. The Company intends to fund any acquisitions that it
consummates through the use of cash from operations, credit facilities, seller
notes payable and the issuance of common stock. In addition, the Company may
seek to raise additional capital through public or private debt or equity
financing. The availability of these capital sources will depend upon prevailing
market conditions, interest rates and the financial condition of the Company.
-12-
<PAGE> 13
PART II - OTHER INFORMATION
Item 2(c) Changes in Securities -
Pursuant to a private placement under Section 4(2) of
the Securities Act of 1933, on January 22, 1997, the
Registrant issued 62,109 shares to David Lewis in
connection with the merger of a subsidiary of the
Registrant with and into Professional Medical Services,
Inc.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits - none
(b) Reports on Form 8-K - none
-13-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RURAL/METRO CORPORATION
Date: May 13, 1997 By /s/ W. R. Crowell
-----------------------------------
W. R. Crowell, Vice President
and Principal Accounting Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 730
<SECURITIES> 0
<RECEIVABLES> 123,124
<ALLOWANCES> 26,288
<INVENTORY> 6,638
<CURRENT-ASSETS> 110,622
<PP&E> 97,183
<DEPRECIATION> 38,772
<TOTAL-ASSETS> 293,347
<CURRENT-LIABILITIES> 24,916
<BONDS> 180,502
0
0
<COMMON> 120
<OTHER-SE> 141,287
<TOTAL-LIABILITY-AND-EQUITY> 293,347
<SALES> 236,445
<TOTAL-REVENUES> 236,445
<CGS> 0
<TOTAL-COSTS> 180,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 32,037
<INTEREST-EXPENSE> 3,658
<INCOME-PRETAX> 19,908
<INCOME-TAX> 8,163
<INCOME-CONTINUING> 11,745
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,745
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
</TABLE>
